The war traders : An exposure

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The War Traders :
An Exposure

By
George Herbert Ferris

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THE WAR TRADERS:

AN EXPOSURE

BY

GEORGE HERBERT FERRIS

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NATIONAL PEACE COUNCIL.
167, St. Stephen's House. Westminster, S.W.

Telephone 6059 Victoria.
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By the Same Author:

A SHORT HISTORY OF WAR AND PEACE (Honw.
University Library: Williams & Norgatb), Is. 1911.

OUR FOREIGN POLICY (Melrose), 2s. 6d. net. 1912.

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HX)

THE WAR TRADERS:

AN EXPOSURE

PREFACE.

The substance of the following paper was read at the
National Peace Congress, Leeds, on June 11, 1913. On
the previous evening, in the House of Commons, in answer
to a request that he would print lists of the larger Govern-
ment contractors, Mr. Asquith had declined to satisfy what
he called " a roving curiosity." It is so many years since
my " curiosity " began to " rove " in this field that I should
hardly have been drawn back to the subject at this time
but for two considerations.

The first arose from Dr. Liebknecht's revelations in the
Reichstag, and the manner of their reception in this country.
It seemed necessary to show that Germany has no monopoly
of the evil here dealt with, and to state more emphatically
than heretofore the chief corollary to the proposition so well
argued by Mr. Norman Angell, that war does not, and as
between great modern nations cannot, pay. War does not
pay the nations. But war panics and preparations do, all
the time and on an enormous scale, pay powerful groups
of men in each nation ; and it may be doubted whether any
real peace will be achieved till this association of political
power and the private trade in arms is broken.

Secondly, the Marconi trials and inquiry have set up
new currents of critical thought. Men who differ in their
view of this melancholy episode may yet agree in hoping
that it may result in a generally higher standard of public
duty. But if that end is to be attained, there will have to
be a much wider inquiry into the connection between
Parliamentary or administratrve power and private profit-
making than has yet been attempted.

Three motives meet, then, in the following pages —
international peace, national economy, and purity of public
life.

I have sought to state the case in precise terms, and to
exclude any statement as to fact that is not verifiable.

221680

Thanks to the reticence of siiccessive Govemmeuts and the
companies concerned, parts of the subject are still " wropt
in myst'ry." But indiscretions will occur, even in the best
regulated businesses ; and some at these have been
particularly enlightening. For the rest, I am indebted
almost exclusively to the columns of the Times and its
Financial Supplements, the Economist, and other financial
journals, the "Stock Exchange Year book," the "Directory
of Directors," " Who's Who," " Who's Who in Business,"
and other financial reference books, the varioue Army and
Navy Annuals, certain company reports and balance-sheets,
the Parliamentary debates, and several former panaphlets
and articles of my own.

Two series of articles which have appeared since this
p^per was undertaken may be here mentioned, the one by
" P.W.W." in the Daily News, where some points of the
Mulliner episode have been more fu41y dealt with, and the
other in the Labour Leader, by Mr J. T. Walton Newbold,
who has analysed not only the directorships, but the lists
of shareholders of some of the leading companies. The
Investors' Review has also printed some of the share lists.
This is a point upon which I have not entered in any detail..

June, 1913.

I.— PATRIOTISM AND PROFITS.

If tkere is one convention that overrides all others in
Europe, it is that of the peculiar sanctity of the processes
and apparatus of "national defence." In France the Army,
in England the Navy, is the Ark of the Covenant. They
represent not merely the prestige, glory, and honour of the
Fatherland, but the very possibility of its existence. With-
out them we cannot live. They are our bravest, purest,
chivalry. The uniform and the flag cover tiiem as with a
holy mantle. Governments, therefore, cannot make too
solemn a face, citizens cannot make sacrifices too large,
v;hen the need of strengthening this power of slaughter is
declared by those in authority over us. This is the on];y
Patriotism ; the man who dares to question it is a traitor
to his country.

We of the Peace Party have usually been content to
describe this conventional Patriotism as a superstition, a
slander on our own nature and that of our fellow men in
other countries. But this is not the whole truth. Every
superstition is based upon a trade ; and this is no exception
to the rule. I propose in the following pages to attempt a
brief scientific analysis of the trading interests (so far as
they are visible in Great Britain) which underlie the
patriotic superstition of our day.

The arsenals, dockyards, and factories belonging to the
State play a smaller and smaller part in the provision of the
national armament. The great mass of this material — five-
sixths of the new naval construction, for instance — is pro-
duced by private firms. The chief armament companies
registered in this country — those having a capital of more
than a million sterling — are seven in number :

Capital.
£

1. Armstrong, Whitworth, & Co 9.512.000

2. Vickers, Ltd 8,588.000

3. Camraell, Laird, & Co 4,075,000

4. Wm. Beardmore & Co 3,703.000

5. John Brown & Co 3.573.000

6. The Nobel Dynamite Trust 3,285.000

7. Coventry. Ordnance Co 1,400,000

These figures include £2,000,000 just added to the capital
of Armstrong 'b, and £740,000 to that of Vickers', mainly
for extensions and foreign branches.*

•Details of these sums will be found in the Econemitt of April 26, 1913.

There are many other firms — I. J. Thomeycroft and Co.,
with a capital of £607,000; J. S. White and Co., of East
Cowes, who are building six ocean-going destroyers for Chile ;
Whitehead Torpedo Works; Scotts, Ltd., of Greenock; the
Birmingham Small /^rms Co.. the British South African
Explosives Co., the Birmingiiam Metal and Munitions Co.,
Kynoch, Ltd. ; Curtis's and Harvey, etc. ; and, of course,
firms like Harland and Wolff and Palmer's do much
Admiralty work, while the Army contractors are too
numerous to mention. Many of these com.panies do civil
as well as military and naval business. It is impossible
to distinguish between the capital used for the one and the
other purpose; and it is, therefore, impossible to say how
much pi'ivate money is invested in this country in the trade
of war. But the seven chief firms alone have now a com-
bined capital of about £34,000,000 (less some little
duplication in the figures) ; and it seems not improbable
that the total capitalisation of the British armaments
business may be fifty millions sterling or more. The amount
of new naval construction alone which was given to private
contractors last year amounted to more than twelve million
pounds sterling.

The first thing to note, then, is the vast size and wealth
of these concerns which flourish upon the nation's suffering,
and suffer when the national burden is lightened. Most of
them have done prodigiously well in recent years, especially
since the anti-German scare of 1899. The Vickers and
Armstrong firms alone have distributed about a million-and-
a-half sterling in profits this year, and are increasing their
capital by about 2f millions. Let me give some illustrative
details. The shareholders of Armstrong, Whitworth, and
Co., had this year, as the Times said, an " agreeable
surprise," in the shape of " a 12^ per cent, dividend on the
Ordinary, with a bonus of one share for every four previously
held, which, at the current value of the shares is practically
equal to 14s. per share. . . . This conversion of undivided
profits into new capital shows that the directors take a
confident view of the near future. . . . For the years of
the present century, the dividend has never fallen below
10 per cent., and on five or six occasions it has been as high
as 15 per cent. ; and this comes after deducting
nearly £90,000 for Debenture interest (not including
the stock held by the Company itself) and £40,000
for Preference dividend." These profits do not trench on
a special reserve of £459,000; and they are in spite oh
the large outlay in moving the principal works
from Elswick to Walker-on-Tyne. Beside its British
contracts, the company has had on hand during the past

jear a battleship for Turkey, another for Brazil, and another
for Chili, the last two being "larger and more powerful "
than any British vessel built by the firm.t It is now, or has
lately been, building also for Japan and Argentina. It is said
that the company " supports 120,000 men, women, and
children by the Newcastle-on-Tyne works alone — that is,
about a third of the whole population."*

At the annual meeting of Vickers, Ltd., on March 28,
1913, Mr. Albert Vickers, the Chairman, was also able to
congratulate the shareholders on "a successful year" at
their Sheffield, Barrow, Erith, and Birmingham Works.
In 1912 alone, the assets of the company increased by about
£1,168,000. A dividend of 10 per cent, on the ordinary
shares was declared (as in each of the past five years), and
there was some complaint that it was not 15 per cent.
It was also decided to issue £740,000 of new ordinary shares.
The new automatic rifle-calibre gun of this firm has lately
jeen adopted by five Governments.

The third of the seven great firms, Cammell, Laird, and
Co., of Sheffield and Birkenhead, has had a more chequered
'career, partly because of a disastrous difference with the
Admiralty and War Office in 1907, and partly because a
large investment in the Coventry Ordnance Works did not
turn out well. I shall refer to the enlightening history of
the latter adventure presently. In the four years,
1903-6, Cammell, Laird made net profits amounting to
£833,000. Up to the latter year they had distributed for
nine years dividends on the ordinary shares averaging over
12 per cent. During 1907, certain mysterious " irregu-
larities," of which no definite information was given, were
discovered at the Sheffield Works, and the Company were
struck off the lists of Army and Navy contractors. In order
to secure reinstatement, the chairman and two managing
directors resigned, and Government work was then recovered.
This episode cost the Company a loss of £169,000 in 1907
and 1908; and while, in the four subsequent years, profits
have been made to the amount of £535,000, this has not
permitted the distribution of any ordinary dividends.

Of John Brown and Co., which is now engaged in
building "the most powerful battle cruiser in the world,"
appropriately named " The Tiger," the Times remarks that
" to have paid 7| per cent, for five successive years, in
spite of labour troubles and increased working costs, is no
mean achievement."

t statement by Sir Andrew Noble, April 19, 1912.
• Times Financial Supplement, March 29, 1913.

II.— THE SHARING OF £73,000,000.

The letter of Cammell, Laird's to the late Lord Tweed-
mouth, appealing for reinstatement on the Admiralty List,
naturally indicated the hardship falling upon the owners of
four mi'Uions of share and debenture capital, and upon the
15,000 men employed in works directly owned by the Com-
pany. This class of investment is not commonly held in
small quantities by poor people ; it is naturally a property of
the well-to-do and the influential. In 1909 the Investors'
Review examined the share lists of several armaments
companies, and it found in that of Armstrong, Whitworth
alone the names o'f 60 noblemen, their wives, sons, or
daughters, 15 baronets, 20 knights, 8 M.P.s, 20 Military
and Naval ofl&cers, and 8 journalists. Later lists show,
among other things, a marked connection between arma-
ments' share-holding and active membership of bodies like
the Navy League. But let us look the facts in the face. The
influence of this traffic does not arise merely from the
wealth of its directors and the power they hold in Parliament,
and the daily Press. Militarism is strong in England because
Lazarus gets some poor pickings from the feast of Dives.
We do not always realise that, while we have by far the
most powerful Navy, the British Empire has also, upon
the peace establishment, f'.e largest military force in the
world, the Russian Army alone excepted. It now falls little
short of a million men,* and when compulsory military
service is fully developed in Australasia, it will considerably
exceed a million. Of these, 725,000 are Britishers, 600,000
of whom are located at home, and the remainder exiled
mainly in tropical or sub-tropical lands. About 480,000 of
them are liable for service in any part of the world in war
time. To these must be added 185,000 men of the Fleet
and its Reserves. The wages of the Navy and Regular
Army amount to over £16,000,000 a year.

Behind this foroe of 910,000 able-bodied and middle-aged
Britishers of the two "services," there lie two bodies, also of
adult men, mostly skiUed and able-bodied, of whose
numbers we have no exact count: — (1) Those engaged in
the arsenals and dockyards and in the works and factories
of the armaments' contractors, and (2) Pensioners, small
and large, possibly 100,000 of them, since their cost on the
Estimates is about £2,500,000 a year. In the case of the

• In Great Britrtin : Re^nlars, LSO.OOO ; ATmy Reserve 139,000 : Special Reserve,
®,000; Territorial Force, 26S.000 ; total, 600,000. In India: British Regulars.
78,000 ; Native Troops. 165.000 ; total, 243,000. In the ColonUi : British Regniars,
47,000; Colonial MUitia (rapidly expanding under compulsion— eay) 100,000; total,
147,000. Total 990,000.

6

Elswids Works, a small number of workmen have an
interest in the sale of arms not only as wage-earners, but
under a system of profit-sharing. On their deposits, a fixed
interest of 4 per cent, is paid, plus a dividend equal to half
the amount by which the ordinary dividend exceeds 4 per
cent., but so that the total does not exceed 10 per cent.
Thiis, if the ordinary share dividend be 10 per cent., the
workman depositor gets 4 per cent, plus half of 6 per cent,
equals 7 per cent. Of 16,000 employees at the end of 1911,
only 2,788 came within this scheme, tieir deposits amount-
ing to £241,788.

The probability is that 1,500,000 adult able-bodied men — ■
which is equal to one in six of the " occupied " adult males
of the United Kingdom — share to some extent in the
£73,000,000 a year which "National Defence" now costs
us. The "share" varies greatly, of course. The Territorials
give in labour very much more than they cost in money;
they are only included for the sake of completeness. As to
the great body of the soldiers, sailors, and armament work-
men, it is enough to say that they are nearly all compelled
by poverty, and that, if they have come to see their own
interests in the maintenance of this particular trade, it is
not so much their fault as the fault of society at large. As
a vast constituency favourable to prodigal expenditure on
armaments, we cannot ignore them, although they get none
of the big prizes of the war trade.

III.— COMPANIES AND COMBINES.

We may now examine more closely the character and
methods of our seven chief firms. I suppose that, if asked,
the average man would say they were seven independent
busmesses, competing, in a patriotic spirit, for the patriotic
work the Government gives them, and peculiarly subject to
fluctuations of fortune according to the state of inter-
national relations. Yet this answer would be far wide of the
truth. They were once, indeed, independent businesses;
they are now highly syndicated, and compete as little as
possible. If they are patriots, it is in a new and singularly
impartial kind — British on Monday, Eussian on Tuesday,
Canadian on Wednesday, Italian on Thursday, and so on,
as orders may be got from China to Peru. Finally, as we
shall see, these are not the kind of men to wait upon the
fortunes of political parties ; they make their own politics ,

they make their fortunes by moulding international rela-
tions to their own will.

Sir Andi-ew Noble, Chairman of Armstrong, Whitworth,
and Co., recently spoke in public of the " keen rivalry " of
the leading firms ; and, no doubt, competition continues
within a considerable field. For instance, three British
groups are preparing to exploit the patriotic sentiment that
is now being so assiduously cultivated in Canada. The
first, the Canadian Shipbuilding Company, is a subsidiary
of John Brown and Co., with a capital of £2,000,000
sterling, and works at Sydney, Cape Breton Isle, which will
soon be able to turn out the largest Dreadnoughts. Secondly,
Vickers Ltd. have incorporated a Canadian Company at
Montreal, with a capital of a million sterling. And now we
learn that Sir P. Girouard and Sir G. H. Murray have just
returned from Montreal, where they have been buying for
Messrs. Armstrong the site for large works on the South
shore of the St. Lawrence. Again, the great firms are pre-
paring to exploit the latest victory of man over Nature,
aerial navigation, for the purposes of warfare. Messrs.
Vickers are building naval airship works on Walney Island,
Barrow, where a thousand or more men will presently be
employed. Messrs. Armstrong are also entering upon the
construction of military aeroplanes and airships.

Things are not exactly what they seem in this sphere,
and we do not know to what extent these concerns will com-
pete. But the Trust tendencies in the armaments trade
have long been known to the economic student. The
process differs in different countries, in the case of this as of
other manufactures. In England it has taken four main
forms — the absorption of minor in major companies ; the
creation by major companies of minor companies in strict
tutelage to carry out special kinds of work ; the amalgama-
tion or syndication of firms in associated branches of
industry ; and the formation of syndicates which do not
themselves manufacture, but hold the shares of different
companies, and so effect a community of interests. Some-
times these forms are mixed. Thus, in 1903, Messrs Cam-
mell, Laird bought the Mulliner-Wigley Company, Ltd.
Two years later, Cammell, Laird came to an agreement with
John Brown and Co. and the Fairfield Shipbuilding Co.,
by which the subsidiary business was rechristened the
Coventry Ordnance Co., a half of the capital being held by
Brown's, and a quarter each by Cammell and Fairfield. The
various kinds of interconnection which I have named are
now a common feature in annual reports and shareholders'
meetings. At this year's meeting of Vickers, Ltd., the
Chairman said that " the subsidiary and connected com-

8

panies bad brought much profitable business to the Vickers
Company, in addition to the satisfactory profits which tbey
contributed as tbe result of their own direct working. That
was, perhaps, especially true of foreign business."

Tbe tendency towards Trustification was well known ; it is
in the nature of ail great routine businesses of our day, and
the only surprising thing revealed by careful search is
the degree to which tbe process has gone. Tbe great body
of tbe War Trade is now, in fact, a vast financial network,
in which firms apparently independent are strengthened by
absorption, and linked together by an intricate system of
joint shareholding and common directorships. Thus,
Vickers, Ltd. absorbed the Naval Construction Co., of
Barrow, the Maxim-ISiordenfeidt Co., and the Electrical
and Ordnance Co., Ltd. They hold half the share capital
of Beardmores, and are directorially connected with Cam-
mell, Laird and Co., Whitehead and Co. (torpedo manu-
facturers), the Chilworth Gunpowder Co., the Harvey
Armour-Plate Co., and other companies. Armstrong,
Whitworth, and Co. absorbed Mitchell's Shipbuilding
Works at Newcastle, and are directorially connected with
the Whitehead and other companies. We have seen the
connection of John Brown and Co., of Sheffield and Clyde-
bank, with the Coventry Ordnance Co. ; they also hold most
of the shares in Thos. Firth and Sons, armour-plate rollers,
and a participating interest in Harland and Woltf ; they own
the Clydebank Engineering and Shipbuilding Company,
besides various mines and iron works, and are connected,
through directors and debenture trustees, with Palmer's,
Cammell, Laird, The Projectile Co., and other firms.
Cammell, Laird, in turn, hold half the shares of the Fairfield
Co., besides a quarter of those of the Coventry Co., and are.
connected with Vickers, Ltd., and other firms. Last year's;
balance-sheets stated the interest in subsidiary cox^-panies to|
ai-uount to over four millions sterling in tiie case of Vickers,
and two millions each in those of Armstrong's and Cammell,
Laird's.

In spite of this close inter-connection the convention of

secrecy " is maintained. During the recent meetings of

the Institution of Naval Architects in Glasgow, the principal

works were practically closed to the visiting experts, on the

ground that Government contracts were in hand.

IV.— COSMOPOLITANISM IN ARMS.

The most remarkable feature of this syndicated business
is its foreign development. Very rarely a company moves

9

itself bodily over the frontier : tiius, the French Hotchkisa
Company, registered m 1887, took over last yeaj
the business of tike English Hotchkiss Company.
But, generally 8i)eaking, the British flag remains
an " asset," as wa« said on a famous occasion.
The building of foreign battleships in British yards would
be anomalous enough, if Imperialist patriotism were what
it pretends to be. But what are we to say of the Continenteil
yards of British firms, which exist only to defend our
foreign " rivals," and do not even yield British labour its
poor solatium? Looking down from tiie hillside of Pozzuoli
over the Bay of Naples, the visitor is surprised that this
lovely coast should be defaced by a red-brick pile with
towering chimneys. It is the arsenal of the British
Armstrong-Pozzuc^ Company, which employs four
thousand men, and is the ck.iei naval supply source of
Germany's second ally. ks the Ansaldo- Armstrong Com-
pany of Genoa, the same firm has built two Dreadnoughts
and several cruisers for Italy, and has built minor vessels for
Turkey. Armstrong's also have an ordnance and sunaour-
plate works in Japan; and they are part owners, with
Vickers and John Brown and Co., of the " Hispana " Naval
Construction establishment at Ferrol, a chief instrument of
King Alfonso's ambitions and the pauperisation of the
Spanish peasant. Vickers, Ltd., are also important con-
tributors to the Italian Navy through the subsidiary com-
panies, Vickers-Temi, Ltd., Odero of Genoa, £ind Orlando
of Leghorn.

One of the most extraordinary episodes of recent financial
and industrial history is the latest rebuilding of the Russian
Navy, in which British, French, German, Belgian, and*
American firms have been and are new co-operating with
the Russian Government — an exhibition of internationalism
as striking, in its way, as the Peace Conferences at the
Hague, which the same Tsar called into being to put an
end to the race of armaments. Fifty million pormds
sterling is the estimated cost of this new fleet, the authori-
sation for which was extorted from the Duma a year ago.
The capital is mainly found by French and other foreign
investors ; the interest is paid by poverty-stricken Russian
peasants and workmen. Now, it is to be noted that
patriotism is more extreme in Russia than in England —
that is to say, it is ultra-Nationalist and ultra -Protectionist ;
it is also ultra-Clerical, and it is commonly associated wi'^
the giving and taking of bribes, but that is another story.
The Russian Government has none of our British objections
to the extension of State business; the more undertakings
the Gt)vemment has under its thumb, the more oppor-

10

tunities of profit are there for the ruling bureaucracy.
Therefore, it was decided that, altiiough foreign money and
skill must be enlisted, they should be made as far as
possible to serve the end of " the progressive creation of a
national shipbuilding industry." So Vickers, Ltd. (who
have just got the contract) are not to supply all the neces-
sary guns, but to build a new gun factory under forms
of a special company with a capital of £1,500,000. So,
again, ships are not to be imported, but to be built by
Russian labour, with Russian material, under foreign
guidance. The first four Russian Dreadnoughts are now
being thus completed, in St. Petersburg, under the super-
vision of John Brown and Co. At Nikolaieff, on the Black
Sea, two other battleships are being built by a Franco-
Russian company ; while another is being built in a yard
partly owned by Vickers, Ltd., who are also helping to
supply the machinery of two of the Baltic vessels. Other
machinery rs being supplied under the supervision of
Messrs. Blohm and Voss, of Ha^mburg. Russia now makes
most of her own armour-plate, but orders have been placed
in America and France. In ordnance, the foreigner has a
greater advantage, and Vickers and Armstrong are now
anticipating substantial orders.

The Times Engineering Supplement (June 25, 1913) has
a significant editorial comment on these facts. In the old
days, the masters of strategy held unmistakably " that a
nation should keep its counsel and its materials for war
alike to itself." This "established principle of secrecy"
has been abandoned, and " the present interchange of ideas
and traffic in war material between nations is a remarkable
product of modern commerce and diplomacy." It is.
" regarded with complete equanimity. Yet it involves what
is perhaps the most momentous paradox of the age,"
namely, that material equipment of navies and armies may
become more uniform, but superiority " will rest with the
nations which conaider and assist the development of
differences from established types " — a conclusion very
comfortable for the "War Traders.

Russia is potentially a wealthy country. At the other end
of Europe lies the small and poor State of Portugal, des-
perately struggling to maintain her new Republican institu-
tions. With a revenue of only £16,000,000 a year, she
has a debt of £180,000,000, and the Budget commonly
fails to balance. Yet the Government of Portugal has been
persuaded that she must have a new Navy, and that only
British builders can save her. Accordingly, a " Portuguese
Naval Construction Syndicate," almost wholly British in
composition, has just been formed, and has got its first

11

contract of £1,500/000. It comprises the firms of John
Brown, Cammell, Laird, the Fairfield Co., Palmer's
Thorneycroft's, and the Coventry Ordnance Co.*
Time was when Englishmen bled for Portugal ; now our old
ally must bleed for us. So the weak pay for the patronage
of the strong.

These great enterprises raise some interesting questions.
From time to time there is a mild scare about England's
position ui the MediteiTanean ; and more frequently there
is a demand for the strengthening of the land and sea
defences of the road to India. Yet the only danger in this
direction has been created by "patriotic". British capi-
talists. Suppose for a moment that the war these patriots
often imagine — the life and death struggle between the
Triple Alliance and the Triple Entente — were to come about.
These arsenals and dockyards would, of course, be seized and
used against us. Sir Andrew Noble or Mr. Vickers would,
perhaps, describe this as an absurd supposition. If tnat be
so, what are they building Itahan Dreadnoughts for? If not
against England, then against whom? Against our good
friend, France? According to the " patriotic " theory, that
would be much the same as building against England. Or
against Tui'key? But the same firms show their impartiality
even by using their Itahan yards to supply Turkey with
warships she cannot use. Or against Spain? And at the
same time they are providing Spain with a fleet to use, on
this hypothesis, against the fleet they have built for Italy.

Politically, this sounds midsummer madness; as a busi-
ness afl'air, it is methodical and profitable in the extreme.
You persuade one State — Italy, for instance — that she needs
more big ships or a new field-gun. The next-door neighbour
— France, for instance — must soon follow suit, and there
will be more orders. Meanwhile, another neighbour — Spain,
for instance — is easily persuaded that her African interests
are in danger, and that the British Dreadnought is the only
type of insjrance to meet the case. The pressure of business
wiU now be transferred from Pozzuoh to Ferrol, and then
round again. Or, to shift the scene, you find it, at a certain
date, quite easy to persuade the Elder Statesmen of Japan
that a modem Navy is necessary to their designs in China
and Manchuria. Are you not the authors of Britain's
might, and is not this the " Britain of the Far East "? All
goes as you have foretold. But now Russia's humiliation
offers her as an easy prey to your blandishments. Millions
have a way of disappearing between the fingers of the
Ministers of the Tsar. Tiiere have been nxmierous naval

•The Economitt, May, 1912.

scandals in St. Petersburg, in which foreign agents have
sometimes played a singular part. At last, however, Kussia
ii? getting her Dreadnought fleet, and Vickers and Brown are
getting their profits. Let Germany look to her Baltic coast-
line ! She looks to it ; and there is good business for Krupps,
and the, Vulkan Works, and the Deutsche Munitions-und-
Waffen Fabrik. Now the Nobles and Mulliners, the
Robertses and Beresforda, are all agog. England resounds
with the anti-German tocsin, and votes of censure are killed
by giving new contracts to Vickers, Armstrong, Brown, and
companies. Parliament and the Press talk of a political
crisis : all that has really happened is the completion of a
new cycle in the ceaseless propaganda of the war-traders.
There are thousands of small transactions every year of
which these large transactions may be taken as a very
advanced type. For the best part of a century, England
has freely spent money and life — we still spend many
thousands of pounds yearly — in the effort to suppress
slave raiders and slave traders in Africa and Asia, and to
repel the attacks of tribesmen armed no longer with bows and
arrows, but with modem rifles and cartridges. Where do
these weapons come from? ,r,Who arms the hill-men of the
Indian frontier, the road bandits of Persia who recently
killed certain British officers ; who arms the slavers of the
Gulf, and the Arabs of the Tripolitaihe, the Somalis and
Abyssinians, the Albanians and Cretans, the Revolutionaries
of South America, and the innumerable natives of inner
Africa? Birmingham is not going to tell us the secrets of
gun-running on the coast of Morocco. But this we know —
that the British exports of fire-arms and ammunition (not
including armour-plates and other large material) amounted
in 1911 to £3,845,000, and that this "patriotic" trade is
rapidly growing. We may be sure that, in this instance
also, the curse of militarism comes home to roost.

v.— MORE INTERNATIONAL EXAMPLES.

The process of international trustification has gone further
than I have yet indicated. How far we do not exactly know.
In this, as in other departments of finance and manufacture,
we are in a transition stage between that of really indepen-
dent and competitive businesses, and of the all-embracing
trusts of the future. The appearance of competition will be
maintained as long as possible, because it is essential to the
" patriotic " programme. " The war in the Balkans," says

13

the Economist (May 24, 1913), " has been, in one of its
aspects, a competition between Krupp and Creusot, and the
groups of bankers which support those eminent manufactur-
ing concerns." There is no pretence here that the German
firm is promoting German national interests, or that French
pohcy will be aided by the success of Creusot "^'It is on both
sides a mere matter of trade. But if Krupp and Creusot are
real competitors, a little of the old illusion is still left.

In the business of loan-mongering, which is the lubricating
agent of the armaments trade, international combination is
becoming more and more common and powerful- The case
of the so-called Quintuple Loan to China is a current illustra-
tion. Five Powers rally their financiers and organise them
into a " pool " for the exploitation of the young Republic
of the Far East. A British group outside this ofl&cial ring,
led by the London and South Western Bank, attempts, as
the Americans would say, to " butt in " by offering China
what seem to be more favoiirable terms. The British
Government resists it with all its force. Meantime, Aus-
tria, which is not one of the five Powers, has been
" jumping the claim." On April 10, 1913, agreements were
signed in Pekin for two six per cent, loans, the one, of
£2,000,000, in the name of an Austrian armaments firm, the
Stabilimento Tecnico of Trieste, the other, of £1,200,000,
in the name of a German firm, the Vulcan Works, Stettin.
The two loans were negotiated as one transaction through
the Austrian Legation, the terms being that about £1,500,000
should be paid in cash in 45 days, the rest to be retained by
the negotiating houses pending a purchase of torpedo boats.*
What on earth does China want with torpedo boats,
especially at the moment when she is under the protection
implied in the Quintuple Loan? Well, there it is; and it
illustrates well the present mixture of competition and com-
bination in the armaments trade. For the moment, the
money-lenders have rather overdone their part. Already
pressed by the costs of the Balkan War, the Paris bankers
are called upon to finance the Civil War in Mexico. " The
Stock Exchange has been staggered," says the Economist
(May 24, 1913), " by this last item of 20 millions sterling
which the Mexican Government hopes to get, at a usurious
rate, from French investors. . . . Can we wonder that
capital is becoming scarcer and that many legitimate and
highly-productive enterprises aU the world over are suffer-
ing? "

My own impression is that a wave of bad trade would
expedite the process of trustification among the world's

* Economist, May 24, 1913, citing the Pekin Correspondent of the Daily Telegraph.

14

providers of war tnatexial, for it would put still greater
pressure on them to save the losses of competition. In his
speech in ihe Beichstag on April 18, 1913, Herr Liebknecht
claimed to have discovered the existence of an international
armaments tnost for the sale of repeating rifles in Russia,
China, and other countries. Tlie component firms were said
to be combined for the fixing of prices in common, and to have
a general committee for fixing accounts, for propaganda
through common agents, for technical help through the
exchange of drawings, models, and so on. The firms named
were Austrian, German, and Belgium. Naturally, this did
not strike the German public as did the case of the Deutsche
WaSens-und-Munitions Fabrik, a company holding a leading
^lare in French companies, and using its influence in the
Paris Press to stimulate Franco- German competition in
armaments. An analysis of the directorships and aflfihationa
of the Nobel Dynamite Trust afiords no less remarkable an
illustration of the cosmopolitan character which the modem
war-trade is assuming. This British company, with its
capital of £3,285,400, its net profits for 1911-12 of £381,900,
and its regular 10 per cent, dividends, is a share-holding
rather than a manufacturing concern. It is, in brief, an
Anglo-German dynamite aUiance. It holds the entire share
capital of the Nobel Explosives Co., Ltd., has seven directors
on the British South African Explosives Company, and is
similarly connected with the Birmingham Metal and Muni-
tions Company, the Chilworth Gunpowder Company, and a
number of other British firms. On the other side, it is
interested in the Dynamite Action- Gesellsohaft, formerly
Alfred Nobel and Co., of Hamburg, the Dresdner Dynamit
Fabrik, and two other German explosives firms. The Trust
itself has a board of fourteen directors, of whom half a
dozen are Germans; while one of the subsidiary companies,
the British South African, has four Germans and one
Frenchman on its board.

An even more extraordinary combination of British,
German, French, Italian, and American firms has been in
existence for the past decade — the Harvey United Steel
Company. Although a dividend of 7^ per cent, had been
paid in 1911, it was decided last year to wind the concern
up — why, does not appear. It was registered in 1901 to
amalgamate or control several companies holding the rights
of the Harvey armour-plate patents. Other firms apparently
came in afterwards. The managing director was Mr. Albert
Vickers, chairman of Vickers, Ltd., with a holding of 2,697
shares. Other directors were Mr. Beardmore, of Wm.
Beardmore and Co. ; Mr. J. M. Falkner, of Armstrong,
Whitworth; and Mr. C. E. Ellis, with a holding of 7,438

15

sliares, representing John Brown and Co., the Coventry
Co., and Thos. Firth and Co. The chief American partner
was the Bethlehem Steel Co., holding 4,301 shares. The
chief French partner was the Schneider Company with 9,862
shares. The combine had four French directors, two of
whom held 2,000 shares each. This did not in any way
prevent the collaboration of the two German armaments
firms condemned in the Reichstag by Herr Liebkneckt, the
Essen Company, holding 4,731 shares and having two
representatives on the Board, the Diilingen Company having
one representative and holding 2,731 shares. Finally, the
Italian Terni Steel Company held 8,000 shares. Behind
the manufacturers stood the bankers, the same extra-
ordinary ainity prevailing. The house of Ernest Ruffer,
with 6,169 shares, linked hands with the Boug^res Freres,
of Paris (3,000j, on the o'ne side, and the Deutsche Bank of
Berlin (1,350) on the other. In forty years all the Peace
Societies have not succeeded in effecting such a Franco-
German reconciliation as this. In the share-list, Mr.
Newbold found the names of one British General and two
Major Generals ; and "behind these were the shadowy
figures of a vast host of Princes, Peers, Ministers of the
Crown, soldiers, sailors, and clerics." A veritable Brother-
hood in Arms. I cannot believe that the Harvey United Steel
Company is reo'.ly dead. Somewhere it has surely had a
glorious resurr jction ; under some metamorphosis, it surely
lives and works to prove the pettiness of national prejudice,
and the ease of forgetting such sores as Alsace-Lorraine,
when mcu have learned the golden wisdom of "good
business."

VI.— A " PRIVATE AMBASSADOR " AT WORK.

This information we owe to the mild rules of publicity
imposed upon public companies in this country. Of the
inner working of the armament firms in general, and the
international combines in particular, we know very little ;
but on several occasions the curtain has been lifted for a
moment, with the most enlightening results. I will give
some brief illustrations of how their agents scout for orders,
of how their managers find their two great kinds of
opportunity — an international crisis, and a great " scrap '
of war material — and of how they command the service of
Governments, Liberal and Conservative alike. Let us take
the lesser agents first.

16

On December 14 and 15, 1904, one Roberfe Lawrie
Thompson, formerly a special con-espondent of the Times,
took action in the Chancery Division, before Mr. Justice
Warrington, against Sir W. G. Armstrong, Whitworth, and
Co., Ltd., claiming an account and payment of commission
and other sums alleged to be due from the firm or its
predecessors, Armstrong, Mitchell, and Co., with regard to
orders for warships and other war material from the
Governments of Chile, China, and Japan, during the years
1892-S. -aThe case is only briefly reported ; but the following
details are given in the Tunes. After Mr. Danckwerts, K.C.,
had outlined the. plaintiff's case, Mr. Rufus Isaacs, K.C.,
fcr the defendants, said he was glad to be able to inform
the Court that the parties had arranged terms of compromise
which it was not necessary to state publicly. Proceedings
were accordingly stayed, and who will doubt the wisdom
of the great Armstrong firm? But, as the following state-
naent was published without contradiction, its substantial
truth may be taken as admitted, particularly as a former
member of the staff of the Times was concerned.

" It appeared," says the report, " that the plaintiff, from
his previous avocation, knew a great many things that were
going on in various parts of the world, and was personally
acquainted with many foreign personages and officials in
high position. His engagement with the defendant firm
was not that of an ordinary commission agent ; his business
was to find out what was happening in various foreign
countries, to let his employers know what was likely to be
required, and generally to prepare the ground for orders for
warships and war material. His position, in fact, was some-
what analogous, "said counsel, "to that of a private diplomatic
agent or ambassador." This is credible enough. All foreign
correspondents of leading journals have peculiar sources of
information ; many of them have considerable influence in
the countries where they reside. It is the pride of the Times
to maintain something as nearly as possible approaching the
status of a diplomatic service. De Blowitz in Paris and
Dr. Morrison in Pekin are only two of the notable names
in this hierarchy; and do we not know that Mr. Bourchier,
the special correspondent of Printing House Square in the
Balkans, was one of the authors of the Balkan Alliance?"

From 1886 to 1897, then, Mr. Robert Lawrie Thompson
was " private diplomatic agent or ambassador " for the
Armstrong Company ; and up to September, 1894, he was
also special correspondent of the Times, ceasing to act in
the latter capacity " owing to a diti'erence of opinion on the
political situation in the East." His first field of operations,
in 1886, was Spain and Portugal; but " this did not turn

17

out a very profitable business." It was a very different
world in 1886; the first modem navy scare — that of ]\Ir.
Stead and Lord Charles Beresford — -had only just set going
the great ocean race. Who knows? It may be the bread
Mr. Robert Lawrie Thompson then cast upon the waters
that is now returning in fat contracts to the Brown-
Cammell and Armstrong- Vickers- Brown •combines. In
1890 Mr. Thompson began to represent the firm in Argentina
and Chile, "in which latter country," said counsel, "he
had special advantages for obtaining orders." What the
"special advantages" were, we are not told; but, appar-
ently, the result was satisfactory, for in August, 1892, this
remarkable commission arrangement was arrived at with
regard to operations by the " private ambassador " both in
South America and in further Asia: "2^ per cent,
commission on the cost of hulls and engines of orders for
war vessels for Chile ; 5 per cent, an orders for other war
materials ; 1 per cent, on the hulls and engines and all war
material ordered by China and Japan during plaintiff's
residence there and for one year afterwards; £1,000 towards
expenses." Mr. Thomps<Hi went to China in 1893. In
February, 1894, he had a difference with Sir Andrew Noble;
and six months' notice was given to terminate the contract.
The misunderstanding was cleared up, however ; and the
arrangement went on. In March, 1895, Mr. Thompson
returned to England; and soon afterwards a subsidiary
agreement was made by which, in addition to the one per
cent, commission, he was to receive £3,000 a year for
expenses for a period of a year and a half from the following
August. He did, in fact, remain in the East for that period
— till May, 1897; and it was in regard to sums outstanding
under these agreements that he took action against the
Armstrong Company. How much Mr. Thompson claimed,
or how much Armstrong's paid, we do not know. It will be
seen that there was to be at least £5,500 for expenses alone ;
as the arrangement lasted so long, it is probable that the
other payments were substantial.

What is it in this story that shocks the mind of the
ordinary peaceful citizen? Evidently businesses of the
magnitude of those with which we are dealing must have
their agents and travellers, open and secret. What vaguely
moves our disgust is, perhaps, just this, that it should be
necessary for a certain class of British manufacturers, for
whom a peculiar degree of patriotism has been claimed, to
maintain abroad a service of scouts whose profit depends on
their power of inveigling smaller foreign nations (" half-
devil and half-child," as tixe bard of empire called theml,
into the deadly feuds and the abominable waste of the

18

"Great Powers." We know in our hearts that, m the
case of these small States, the conventional arguments have
none of the plausibility they have in England, France, or
Germany. If Portugal is in danger, two or three battle-
ships cannot save her. China no more needs torpedo craft
than Canada needs Dreadnoughts The only reality on
which such a trade can be based is the readiness for violence
which seems to exist in and between certain South
American States. Civil war or international war, no matter
— the agent of some British Trust stands at the elbow of
the rival freebooters, and his trade depends upon their
savagery. We are parties to solemn treaties closing large
parts of the earth to the traffic in arms. We keep gunboats
here and there to repress this illegal traffic. At the same
time, arsenals and dockyards inseparably bound up with
the British State are carrying on a larger traffic essentially
of the same character. All over the world the name of
England is being thus damned, in the eyes of the peoples
and posterity, as the supreme exemplar in the arts of homi-
cide. The iniquity of dumping opium upon a reluctant
China has at last been most practically recognised. When
shall we see that the trade in big guns and high explosives
is equally a trade in poison?

VII.— IS IT COERUPT?

Whether in a more limited sense it is a corrupt trade is
a question we can hardly overlook at the present moment,
but it is altogether a subordinate question. During his visit
to South America in 1911, M. Clemenceau declared that
French guns were beaten by German guns in Argentina, not
because of their superior make, but by the more liberal
bribes given by German agents. I have listened in Con-
stantinople and St. Petersburg to astonishing tales, and
travellers familiar with Portugal and Spain, Italy, and
China could probably cap them. In some of these countries
bribery is the rule rather than the exception. That,
happily, cannot be said of England. But corrupt practices
are still so prevalent as to have led recently to the estab-
lishment, under the presidency of Sir Edward Fry, of a
" Secret Commissions and Bribery Prevention League," the
purpose of which is to secure the full administration and
the strengthening of the Prevention of Corruption Act,

19

1906.* It appears that the War Office has expressed its
sympathy with the work of the League, and the Admiralty
has shown its zeal by forbidding the sale in canteens of any
kinds of goods with which prize coupons are given away I
The League has had before it cases of " alleged bribery of or
by . . . army agents . . . canteen managers . . . company
secretaries . . . Government officials' . . manufacturing
engineers . . . metal merchants, military contractors, and
naval contractors." Although the secrecy maintained by
the Admiralty and War Office with regard to their lists of
contractors is calculated to give an unfavourable impression,
I know of no evidence that the armaments trade is more
liable than any other to the petty forms of this evil.
As I have said, we do not know what were the " irregu-
larities " which crippled Cammell, Laird and Go. in 1907;
but the punishment was a heavy one. And, in a higher
sphere, the Netheravon case,! like the Marconi case, sug-
gests that, at least whenever Party interests can ue served,
a dubious transaction is likely, sooner or later, to attract
public notice. Sensational as these incidents may prove,
their importance is small in comparison with the normal
and accepted conditions of the trade in arms. The tongue
of scandal wags if a Minister sells a piece of land to the
Government in which he holds a place, or buys a piece of
land from a fellow Minister or a Parliamentary supporter.
But the purchase of warships, guns, ammunition, and other
supplies from companies in which friends, relatives, and
supporters of Ministers are managers, directors, or share-
holders is part and parcel of the British governing system.
Powerful associations, many of whose members are share-
holders, exist to foster, if not the trade directly, the par-
ticular superstition on which this trade thrives. It is,
apparently, quite in order for a director of one of these com-
panies to demand, from his place in the House of Commons,
greater expenditure, some of which will go into the pockets
of his firm. It is not simply in order, it is proof positive
of patriotism, that the leaders of a great Party should set
themselves to create a cloud of panic that will presently
burst in a blessed rain of dividends among their followers.

• In commending the work of the League, the txineii spoke of this evil as " a
canker that has eaten deeply into the commercial integrity of which this cou«>try
is justly proud." See " The War Against Bribery," by the Hon. Secretary,
Mr. R. M. Leonard. The League's Offices are at 8 and 9, Queen Street Place,
London, E.G.

t In 1899, Sir Michael Hicks-Beach's Netheravon estate, on Salisbury Plain,
was purchased by the War Office, with the assent of the Treasury. Sir Michael
was at the time Chancellor of the Exchequer, and therefore left the management
of the matter to Mr. Balfour iind Mr. Goschen. The net rental of the 7,817 acres
was £2,629, and thirty-flve years' purchase was given. The valuation for death
duties was £43,0.37, the actual purchase price £93,411.

20

It is to this class of fact, rather than to any possibility of the
pettier kind of corruption, that I wish to draw the reader's
notice.

VIII.— " MOST VALUABLE ASSISTANCE."

Is it, perhaps, as a guarantee of purity of administration
and perfect integrity that the boards of the companies
and combines are packed with representatives of what, for
brevity, I may call the governing and decorated classes?
Take Armstrong, Whitworth's, for instance. The Chair-
man, Sir Andrew Noble, is a Baronet and Knight Commander
of the Bath, Commander of the Order of Jesus Christ
of Portugal, Knight of the Order of Charles III. of Spain.
Grand Cross of the Crown of Italy, First Class of the Sacred
Treasure of Japan, and he also caiTies Turkish, Chinese,
and Brazilian honours thick upon him. Need I add that
this Cosmopolitan " patriot " is a Conservative and a Tariff
Eeformer? To balance matters a little, the Vice-Chairman
is the Right Hon. Lord Rendel, formerly friend and host of
"William Ewart Gladstone, and father-in-law of Henry Neville
Gladstone, who is also a member of the Armstrong Board.
Other directors are Sir G. H. Murray, G.C.B., P.O., I.S.O.,
who was private secretary successively to W. E. Gladstone
and Lord Rosebery, and was Permanent Secretary of the
Treasury from 1902 to 1011 ; Col. Sir Percy Girnvard,
R.E., K.C.M.G., D.S.O., who was Governor of Northern
Nigeria till 1909, and Governor and Commander-in-Chief of
British East Africa thence till last year; Rear-Admiral
Sir Charles Ottley, K.C.M.G.. M.V.O., formerly British
Naval Attach^ in the United States, Japan, Italy, Russia,
and France, Naval Assistant Secretary of the Defence Com-
mittee in 1904, from 1905 to 1907 Director of Naval Intelli-
gence, and thereafter Secretary of the supreme war-board
of the Empire, the Committee of Imperial Defence. At the
last annual meeting of the Company, Sir Andrew Noble
spoke gratefully of the " most valuable assistance " of these
gentlemen; and, indeed, " most valuable " it must be, for
there could hardly be found three men carr;\'ing with them a
completer knowledge of the inner working of the British
Government, to say nothing of their ]iersonal influence and
capacity. Among the trustees for the debenture holders of
Armstrong's stand Earl Grey, formerly Governor General of
Canada, and the Hon. Alfred Lyttelton, K.C., formerly
Colonial Secretary, and an active member of the Front
Opposition Bench.

The other companies approach as near as they can to this

21

remarkable achievement. Lord Aberconway, a prominent
Liberal peer, is chairman of John Brown and Co., which
includes on its board two distinguished officers, Lieut. -Col.
G. S. Davies and Captain Tressider, C.M.G. Lieut. Sir A.
Trevor Dawson, formerly of Woolwich, ie one of the managing
directors of Vickers, Ltd., of which Sir Vincent Caillard, the
distinguished financier who has so often been engaged in
special political duties for the British Government, is also
a dh:ector. The Hon. H. D. Maclaren, M.P., Lord Aber-
conway 's eldest son, is a director of Palmer's. Lord Pirrie,
chairman of Harland and Wolff, is also a debenture trustee
of John Brown and Co., of Thomas Firth and Co., and of
the Coventry Ordnance Co, Lord Eibblesdale is a director
of the Nobel Dynamite Trust. Sir A. T. Hadfield, another
Liberal, is chairman of the Hadfield Foundry Co., Ltd. Lord
Balfour of Burleigh is a debenture trustee of the Coventry
Co., and of Beardmore's, of which the Marquess of Graham
is a director. Mr. S. Roberts, M.P., is a director of Cammell,
Laird, and Co. Admiral Lord Charles Beresford, K.C.B.,
M.P., is chairman of Henry Andrew and Co., manufacturers
of steel for armaments. Admiral Sir G. Digby Morant,
K.C.B., formerly superintendent of Pembroke and Chatham
dockyards, is a director of the Fairfield Co. Admiral Sir
Cyprian Bridge, G.C.B., formerly Director of Naval
Intelligence, is a debenture trustee of Thomey croft's.
Admiral Sir Archibald Douglas, G.C.V.O., formerly a Lord
of the Admiralty, is a director of Hadfield and Co., Palmer's,
and Richardson, Westgarth's. General Brackenbury, C.B.,
K.C.B., G.C.B., K.C.S.I., formerly Director of Military
Intelligence, and Director of Ordnance at the War Office, is
director of the Hadfield Foundry Co. Lord Sandhurst,
G.C.I.E., twice Under-Se-cretary of War, is, or was, a deben-
ture trustee of Vickers. Major-General S. Nicholson, C.B.,
formerly Assistant-Director of Artillery at the War Office,
and Colonel-Commandant of the Royal Artillery, is chairman
of the board of the Guncotton Powder Co., Ltd., where his
past experience should surely prove " most valuable."
Major-General Micklem, R.E., is a director of the King's
Norton Metal Co. The Hon. H. C. L. Holden, C.B.,
formerly head of the Royal Gun and Carriage Factories at
Woolwich, retired from the Royal Artillery this year, is a
director of the Birmingham Small Arms Co., Ltd., of which
Sir H. Rogers, ex-Mayor of Birmingham, is chairman. And
so on. It is not suggested, of course, that the debenture
trustees named have directorial powers; but their position
as financial watchdogs is significant.

The tradition of a passage to and fro between high Govern-
ment posts and the direction of the contracting companies

22

has ansen gradually, though its recent extension has been
rapid. In 1863, the first great naodem warship designer,
Sir Edward Reed, was called from private work to be head
of the construction department of the Admiralty. After
" opening a new epoch " there, and giving the world many
interesting examples, he retired in 1870, and joined Sir J.
Whitworth in his ordnance works. Afterwards, he became
chairman of E-arle's shipbuilding works at Hull, and directed
the construction of warships for a number of foreign Powers.
Sir W. H. White, having been in the construction depart-
ment of the Admiralty from 1867 to 1883, then undertook
the organisation and direction of the warship building
department of Armstrong and Co. In 1885, after the Stead-
Beresford scare, he returned to the Admiralty as Chief
Constructor, remaining till 1902, when he received a special
grant of money from Parliament in recognition of his
services. His successor was Sir Philip Watts, who had been
baval architect and director of the warship building depart-
ment of Armstrong's from 1885 to 1901.

What do these facts imply? Firstly, that these im-
mensely-wealthy artd powerful companies and combines are
entrenched firrrily, perhaps irremovably, in the governing
class of Great Britain and its dependencies. Their forty or
fi-fty or sixty millions of capital largely belong to this class,
many members of which would be gravely injured by any
arrest of the competition in armaments ; and millions of
yearly dividends, beside salaries, directors' fees, and trustees'
honoraria are distributed largely within this class, creating,
consciously or unconsciously, in it the permanent temper of
militarism in which our " service " Estimates are conceived
and carried.

Secondly, that they command the kind of skill and special
knowledge which is popularly supposed, and surely ought,
to be the exclusive property of the Government. Upon
that kind of skill and special knowledge the safety of thei
kingdom and the empire is supposed to depend ; yet we see
it being offered like any common commodity to, and bought
by, companies increasingly cosmopolitan in character, com-
panies constantly buildi-ng for foreign purchasers, building in
foreign yards, partners with German, French, Italian, and
other manufacturers. Much of this special knowledge was
once secret information, obtained in the very highest and
most strictly-guarded recesses of the Government service.
All the Members of Parliament at Westminster cannot
persuade Sir Edward Grey to subject his department to the
gaze of a responsible Foreign Affairs Committee ; but Secre-
taries of the Treasury, Colonial Governors, dockyard superin-
tendents. Directors of Naval and Military Intelligence, high

Army and Navy officers, and even Secretaries of that sanctum
sancioru-nt , the Imperial Defence Committee, are perfectly
free to carry the experience they have thus confidentially
gained at the cost of the State into the service of an
abominable private trade. That seems to me a scandal
beside which the Marconi affair and other affairs of the kind
pale into insignificance.

IX.— ECONOMICS OF A NAVAL " SCEAP."

The fact is — and this is the upshot of the whole matter —
the British Government, perhaps the strongest in the modem
world, is powerless before the monstrous array of interests
which I have superficially examined. I said that its two
great opportunities lay in the " scrap " and the " scare."
We have become so much accustomed to the " scrapping "
of machinery in productive industry that what is politely
called " the progress of invention " is accepted as inevitable
in the trade of armaments also. Few men stop to think of
the essential difference between a new and ultimately
cheaper process of spinning cotton, or building high struc-
tures, or refining metal, or transporting corn, and a new and
for ever more expensive type of warship, cannon, rifle, or
ammunition. In the former case, the ordinary course of
commercial competition secures a real gain, in which the
public has some share ; the inventor fails unless he can give
a better or a cheaper result than that already existing. Even
in the world of luxury, a relatively limited sphere, there is
usually something of beauty or amenity to compensate for
much waste. The business of armaments alone is pure
waste, and pure waste upon an ever-extending scale.

Why ever extending? One answer to this question is
that, although it is the chief concern of Governments, the
provision of armaments is not a Government monopoly, but,
for the most part, a private trade. As such, it has these
great advantages over other trades in the exploitation of
inventions — the cost is practically immaterial, since there is
a national purse to dip into; there is no question of securing,
as every other invention must, a cheaper or more publicly
profitable commodity; and there is no visible end to the
process of " scrapping." All you have to do is to invent a
more deadly weapon, and then play upon the fears, real cr
assumed, of every Government for every other Government.
" Humanity? " Rubbish, my dear sir, this is the Trade of
Death, and no nonsense about it. " Patriotism? " Read

24

the life of Eobert Whitehead, the inventor of the modem
torpedo, and consider other instances I have set forth. Con-
sider the stake : we are not dealing here with paltry
thousands, but with millions and scores of millions.

Even a sketch of recent " scraps " and scares would
require a substantial volume. There are two central points
of interest — 1884 and 1905. The former is the year of the
Navy panic created by W. T. Stead, Arnold Forster, and
Admiral Lord Charles Beresford. It led to a whole series
of great shipbuilding programmes, and greatly stimulated the
Imperialist reaction culminating in the South African war.
Every new step of successive First Lords — Lord George
Hamilton, Lord Goschen, Lord Spencer, Lord Selbome,
Lord Cawdor, Lord Tweedmouth — was going to be the last.
Goschen was the great plunger : in five years he brought up
the naval charges from £19,500,000 to £31,500,000 a year.
During one debate he pooh-poohed Lord Charles Beresford
as an " irresponsible person." The caustic reply was that
" the Government has done everything, or nearly everything,
that I have wanted them to do for years past. " Lord Charles
added a distinctly naughty story of a certain First Lord who
declared one day that "if he had a couple of millions for
the Navy he would not know what to do with it, but shortly
afterwards came down to the House and said that if he did
not have six millions we should lose the Empire." So far,
we had been, ostensibly, building against France and Russia.
In 1904, Lord Selborne brought the Navy Estimates up to
£87,000,000, though the Russian fleet had been destroyed
and the Anglo-French Agreement concluded.

Then came Admiral Sir John Fisher's great "scrap,"
the philosophy of which is explained in an appendix to the
Estimates of 1904-5. A new and shorter estimate of the
effective life of warships was adopted which condemned
most of the vessels recently built as worthless. In twenty
years, we had spent about £450,000.000 in the vain effort
to establish a maritime despotism. In five years, the cost
of the Navy had doubled ; in twenty years, it had quadrupled.
We had not fought a single considerable naval battle in that
period; yet the greater part of a sum which would have
sufficed to establish old-age pensions and industrial
insurance in perpetuity without further charge was now
represented only by scrap-iron. The whole classes of
" protected " and " unprotected " cruisers were condemned
as practically useless, except for " police " purposes, a
verdict affecting 115 vessels, which had cost between
£35,000,000 and £40,000,000. Of these, 34 vessels were
only five years old. The 38 cruisers of Lord George
Hamilton's 1890 programme, and all of the same type for

25

which Ix)rd Goschen and Lord Selborno were afterwards
responsible, were dismissed to the scrap-heap.

You may suppose that such a lesson as this could not
Boon or easily be forgotten. If so, you do not realise what
it is to live under a tradition that we must give everything
the Admiralty and its contractors ask for. The mass of
toilers, who do not read Parliamentary reports or State
papers, never heard of Lord Fisher's great " scrap," or
never understood it. The "governing classes " understand
it — otherwise. For them it was really the preparation for
a new start, a Spring cleaning of the Whitehall Casino in
readiness for a new gambling season. The sacrifice of old
ships should have resulted in a large economy. The
memorandum announcing it stated that £4,500,000 a year
would suffice for their replacement. Yet the next vote for
new building was £11,500,000.

Next there appeared the new portent, the Dreadnought,
laid down on October 2, 1905, and out at sea a year later.
In whose brain this colossal slaughter-machine was
Conceived, we do not know; we only know that it was a
British brain — no foreign enemy jealous of our power or
possession put this threat upon us — and that many
millions have been paid to private traders to duplicate and
still further improve it. At a stroke, the competition of
navies, of which we bear the heaviest cost, was, by our
action, lifted to a yet higher and costlier plane. The United
States followed suit in 1906, Germany in 1907. Pre-
Dreadnought types now scarcely counted. Large classes of
ironclads and cruisers recently built were again rendered prac-
tically obsolete. A few months before, most of them had been
officially given an effective life of from 15 to 22 years. What
this new scrap-heap represents in cash — otherwise, in lost
labour — it is hardly possible to say, perhaps £70,000,000 or
£80,000,000. The sequel is fresh in all our memories.
Dreadnoughts have developed into Super-Dreadnoughts.
The original of the type had a displacement of 17,000 tons;
they are now building to 29,000 tons, and the cost is in
proportion. Thirty of these monsters have been or are
being built, at a cost of seventy or eighty millions sterling.
Now, the aeroplane and airship threaten to revolutionise
warfare ; and experts are talking of an altogether new type
of warship, driven by gas or oil fuel, with internal com-
bustion engines, which will abolish the existing type of
vessel.

Such is the punishment to which science dooms human
folly. Invention and large-scale production govern the
making of the machinery of manslaughter as well as oi
useful commodities. But with what a different result ! It

26

is an automatic multiplication of evil. Every step in the
increase of armaments is bad in itself, but it is worse in
leading to a new stage of still greater waste and provocation.
Yet all the forces of Gk>vernmental power and trading
interest go to stimulate the process. What a satire it is on
our claim to be an enlightened people that the only great
manufacturing business the direction of which we entrust
to the State is the one which is a perfect embodiment of
the worst human passions, and the most elaborate system
of organised waste ever conceived by the wit of man !

X.— HISTOEY OF A GREAT SCARE.

" We have been hasty in the scrapping of cruisers," says
the Navcd Annual for 1912. But what would you? The
War Traders must live ; the Government has allowed a vast
interest to grow up of which it is no longer master. The
theory of the matter we take to be that the State arsenals
and dockyards are kept up only sufficiently (1) to afford a
means of floating new types and testing contract prices and
qualities, and (2) to permit of the necessary expansion in
time of war. We really depend upon Armstrong's, Vickers,
and the rest. I have said that many of these firms carry
on other branches of manufacture. They have laid down
enormous plants ; they are continually engaging more
capital, establishing new factories, enlarging their lists cf
workmen. They have every reason, even in prosperous
times, for attempting to cajole or coerce the Government
to give them new orders. We have seen something of the
political influence they can command ; and we have the
evidence of Sir Robert Chalmers before the Estimates
Committee of 1912 that Treasury control, always limited,
" in the case of the Army and Navy is very small indeed as
regards material and contracts generally — contracts for the
building of ships, the purchase of guns."* But imagine the
position of these companies when trade is depressed, or
when, for any reason, they are individually suffering a slack
time. We may be sure that every nerve is then strained
to obtain Government work; and, if the easiest and most
effective argument is an appeal to international jealousy
and fear, are we not properly punished for our credulity?
To give the devil his due, the system in which Patriotism

• Pp. 277, Question 30.— Asked whether the Treasury had any expert means of
checkinp the cost of Army and Navy contracts. Sir Robert Chambers replied:
" None whatever." The Admiralty itself " have practically the wliole control."
— Questions 73 and 89.

27

is the means and Profft the end is much older than the
present generation of armament contractors. They have
but bettered an ancient tradition, one that will last as long
as the servility of the people. The offence which led to the
downfall of Mr. H. H. Mulliner was not that he raised a
baseless s«are, but that, his success having benefited other
companies rather than his own, he overstepped all discretion
in his complaints.

Briefly, this is the story : In 1905, Mr. Balfour's Govern-
ment was in power, and the prospect for the armaments
trade, under the new conditions introduced by Lord
Fisher's great " scrap," was of the best. In June, the
Coventry Ordnance Company wa^ established, in the manner
already described; and, in the following month, speaking
at the annual meeting of the chief parent firm, John Brown
and Co., Sir Charles Maclaren was reported as " expressing
pleasure that Sir John Fisher was determined to go on
building battleships, because that was certain to bring more
work to their company." In December, however, Mr.
Balfour resigned; and in January, 1906, the Campbell-
Bannerman Gx)vernment was confirmed in its place by the
most emphatic verdict recorded in any modern General
Election. The very completeness of the rout may have
suggested to the energetic and resourceful mind of Mr.
H. H. Mulliner, managing director of the Coventry Ordnance
Company, the need of a campaign independent of the dis-
credited Tariffists.

The " Diary of the Great Surrender," which Mr. Mulliner
himself afterwards published {Times, Jan. 3, 1910) con-
tains these two entries, which practically cover the period
of the campaign: —

" May 13, 1906, Mr. Mulliner first informs Admiralty of
preparations for enormously increasing the German
Navy. (This information was concealed from the
nation until March, 1909)."

" March 3, 1909, Mr. Mulliner, giving evidence before
the Cabinet, proves that the enormous acceleration
in Germany for producing armaments, about which
he had perpetually warned the Admiralty, wa?! an
accomplished fact, and that large quantities of naval
guns and mountings were being made with great
rapidity in that country."
For three years, in fact, Mr. Mulliner gave himself to
the work of propagating the myth of a gigantic expansion
of Krupp's works, in particular, and German acceleration
in general. It was an underground campaign (the indis-
cretion came afterwards) ; but we gather from thp subsequent

28

Tetters and speeches* that Mr. MuUiner's " information,"
Bent first to the War Office in May, 1900, was " passed on
to the Admiralty," " was discussed by them with several
outsiders," and then " passed from hand to hand so that
hundreds have read it." Of this "information," 1 need
Qow say nothing more than that, as soon as it became public,
it was emphatically contradicted by Messrs. Krupp, through
Mr. John Leyland, M.P., and other correspondents, that,
after some years it was practically admitted by the Govern-
ment to be false, and that time has proved that it never
had any real basis. It was, nevertheless, propagated with (
unremitting zeal, in forms more and more lurid, and with I
the gradual assent of the leaders of the Opposition. But (
plans and proposals made by the Coventry Works to the \
Admiralty were apparently rejected in 1907 and 1908.

In April, 1908, Sir Henry Campbell-Bannerman was
succeeded by Mr. Asquith, and the Ministry was recon-
structed, with Mr. McKenna at the Admiralty. The new
pombination was far from being suspected of " Little ,
Pnglandism " or a slavish regard for peace and economy;
but it was considered to have great personal strength.

In the following autumn, Mr. Blatchford opened his
incendiary campaign in the Daily Mail. At the same time, in
November, 1908, Mr. Mulliner, according to his own account
of the matter, "was fortunate in obtaining a hearing from
one of our greatest generals " — presumably Lord Roberts,
who, in the House of Lords on November 23, prophesied
" a terrible awakening in store for us at no distant date."
Mr. Mulliner attributes to this powerful aid the subsequent
surrender of the Government to the scare-mongers.

We have now reached the crisis of March, 1909. On the
3rd of that month occurred the extraordinary incident of
Mr. MuUiner's solemn reception by the supreme governing
body of the Empire, the Cabinet in Council assembled at
Downing Street. Ten days later, the statement explanatory
of the Navy Estimates was published. It showed a total
of £35,142.700 for 1909-10, an increase of £2,823,200, new
construction accounting for an increase of £1,340,000. This
was to allow for the building of four Dreadnoughts and other
ships; and the Government asked for power to build four
other Dreadnoughts contingently on its fears of German
acceleration being justified. The Estimates themselves, the
discussion of them on March 16 and subsequent days, the
attitude of the Opposition leaders, and the after-action of
the Government, all bear strong marks of the secret cam-

• MuUiner's owa communications (Times, August 2 and 16, September 21,
December 14 and 17, 1909; January 1, 3, 6, 7, 8, 12, 15, and 18, 1910); a speech at
Bedford (Times, December 20, 1909) Mr. M'Kenna (Times, January 7 and March
17, 1910) ; Mr. Duke, K.C., M.P., and other speakers in the Estimates discussion on
March 16, 1910.

29

paign ot untrue intormation on which Mr. Mulliner and his
friends had been engaged for three years. Mr. Balfour per-
formed prodigious feats of imaginative calculation as to
Germany's future Dreadnoughts. The Government had
foretold 17 for March, 1912. Admiral von Tirpitz told the
Budget Committee of the Reichstag (on March 17) that
there would be only 13 in the Autumn of 1912. Mr. Balfour
declared they would have 25, or, in any case, 21, in March,
1912. This " danger point " being long past, we can now
test the various prophets by accomplished fact. Admiral
Tirpitz has been fully justified by time: Germany had, in
fact, only nine Dreadnought battleships and cruisers on
March 31, 1912, and only 14 on March 31, 1913. The British
Government calculated 17 for March, 1912; this number
is now expected to be reached in March, 1914!* As for

Mr. Balfour's estimate of 21 or 25 !

But we anticipate. However incredible it may now seem,
in March, 1909, the untrue information first floated by Mr.
Mulliner, of the hitherto-unfortunate Coventry Ordnance
Works, purveyed by him to the aforesaid famous general,
to Mr. Balfour, Lord Cawdor, Mr. Lee, and a number of
other M.P.s, including Mr. Sam Roberts, of Sheffield, his
" former co-director " in Cammell, Laird's, and above all,
to the Cabinet itself ; then purveyed by all these gentlemen,
in various degrees and forms, to Parliament and the Press —
this information swept the country off its feet. Croydon was
carried triumphantly on the cry: " We want eight, and we
won't wait." Mr. Balfour's vote of censure was rejected;
but Ministers had accepted the grave (as the event proved,
the shameful) charges against the German Government, and,
as the "Annual Register" says, "All but the extreme
economists were silenced." On July 26, Mr. McKenna
announced that the four " contingent " Dreadnoughts would
be laid down forthwith.

One of the first new contracts was given to Cammell,
Laird, and at a meeting of the Company, in which Mr.
Roberts, M.P., took part, " there were," according to the
Times, " many expressions of sympathy with the directors,
and admiration for their work." But what of Mr. Mul-
liner 's own concern, the Coventry Ordnance Works? It
was constantly in evidence during the scare, chiefly by heck-
ling questions in the House as to whether it was receiving
orders, and, if not, why not. Apparently it was still not
favoured by the Admiralty. As time went on, and the public

• " Naval Annual, 1912," p. 81, where the following figures are given : —

Britain. Germany.
March 31, 1912 .... 18 .... 9

„ 1913 .... 28 .... 1*
„ 1914 .... 34 .... 17

30

agitation subsided, Mr. Mulliner's soul burned within him.
But the appetite of the Jingo Press was, for the moment,
sated. The Times told him plainly (January 5, 1910) that
his " diary," directed against the Government, was " some-
what less than just, and not a little misleading." But the
unpardonable, the fatal thing for Mr. Muiliner was his avowal
of the authorship of the scare, and, in particular, of his visit
to Downing Street ^Ministers may have to bow to a storm
originated by the armament traders ; but they could never
consent to have the true history of such an episode pubi>>cly
advertised. Mr. Muiliner was politely warned oS. He had
vindicated his right to a niche in otir political history, at the
cost of his post. He retired with compensation, and was
succeeded as managing director by a man of greater dis-
cretion. Kear-Admiral E. H. S. Bacon, C.V.O., D.S.O.,
approached these matters with a complete knowledge of
oflQcial traditions, for after being first Captain of the Dread-
nought, he was Naval Assistant to the First Sea Lord, and
from 1907 to 1909, Director of Naval Ordnance and
Torpedoes. Under him, the Ck)ventry Company has
received heavy Government orders and has increased its
capital from a £1,000,000 to £1,400,000.* From which, we
may see that a successful agitator must sometimes be con-
tent to k^ep his mouth shut, and that there is more than one
reason why high officials go into this particular ta:ade.

XI.— CONCLUSION.

To sum up : The great bulk of the so-called defence
expenditure of the British Empire goes into the hands of
private profit makecs. It is an immensely large and lucra-
tive trade. It consists of companies and oombines, the
strongest of which are closely allied, and compete less and
less. It is essentially, and is becoming more and more, a
cosmopolitan trade; its owners' nationalist pretentions are,
therefore, rank humbug. It employs the usual touting arts
of commerce; but it also manufactures two special kinds of
opportunity : — (1) The flotation of new types of arms, which
result in enormous " scrapping" of existing material; and
(2) The international scare, of which the Muiliner " crisis "

•At the annaal B»««ting of Jofaa Browm aad Co., on Jnlj 1, 1913, Lord
Aberconway said : " Coventry was improving, bnt it was a great drag on their
finances, and wou4d be for some time. Tbe plAoe was now fnHy recognised by
the Goverarnent as an essential part of the natkmal armament workis. Last
aotumn he went over the Scotson works, where they made the heavy naval
mountings, with Mr. Winston Ctwrchfll. who gave him an assorance — wtiich be
had carried out — that Corentry would now be regarded slb one of the roost
important supplying firms for toe GovemmeDt, instead of t^lng coid-sfaoaldered,
as it was for mani' years past." — (.Tinea report.)

31

J^21680

m 1909 is a type. It is these two processes which'
mainly account for the ruinous level of our present national
expenditure. In the person of retired military, naval, and
civil servants of the highest rank whom it employs, the
trade possesses secret information supposed to be available
to the heads of the G-overnment alone. And it is so firmly
entrenched in the governing class of the country that no
Ministry has yet dared to make a serious effort to dislodge it.

Such is the modern trade of arms ; and I will add only one
word about it. If British Democracy does not soon find a
way of destroying this Hydra, it will destroy Bri^-ish
Denjocracy.

Tlie Haiioaal Labosr Prees, Ltd., Manchester and Loaien.

32

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